Different stages in start-up investment
Stage 1: Seed Funding As mentioned, EUN partly helps companies that are active in the SEED and Start-up stage. The SEED stage is mainly tackled by commission projects but also few participants at the Venture Contests will have interest in this stage. SEED funding is provided by for example the European Commission or by Business Angels (Family, friends or other entrepreneurs) and contains modest amounts of capital that can be used by entrepreneurs to finance the early development of their product. This could be directed towards product development, market research and developing a business plan. Usually a seed-stage company has not yet established commercial operations; therefore the company is not generating any income and cannot continually fund their own development costs. The first seed investment round ranges from 250.000 to 1 million. Stage 2 Start-up investment Companies that are able to launch their operations and that are ready to enter the commercial market can be considered as early stage. At this point the business can consume vast amounts of cash. In order to enter the market successfully another round of investment usually is requested. These companies have been in business for just a short time and are about to bring their product into the market/ is seeing its first revenues but still looks for profit. Europe Unlimited tackles these companies through the commission projects and through their European Venture Contests. When these companies have been in business for less than three years, they have a product that is in a beta version and generates revenue but not necessarily profit. This is the point where venture capital investors become more interested, non-specialized venture capital funds in general invest only a small percentage of their capital in start-up companies. Venture capital fund managers most often manage private money on behalf of institutional investors, such as banks, insurance companies and pension funds, or of wealthy families. Their value proposition is to return interest well above other investment opportunities, such as the stock market. They therefore only invest in companies that have a strong business model ; the potential for high growth and that can be sold within three to seven years at a substantial profit Only when a business generates profits, or is distinctly set to generate profits, larger private equity funds start to become interested. In order to reduce risk, a venture capitalist usually will provide capital in steps according to a company’s development. Following a successful start-up investment, for example, your business is likely to need further capital to grow its revenues; this is also called early stage investment. Stage 3: Later stage (growth) Capital provided after commercial manufacturing and sales but before any initial public offering. The product or service is in production and is commercially available. The company demonstrates significant revenue growth, but may or may not be showing a profit. It has usually been in business for more than three years. Third Stage - Capital provided for major expansion such as physical plant expansion, product improvement and marketing. Expansion Stage - Financing refers to the second and third stages. Mezzanine (bridge) - Finances the step of going public and represents the bridge between expanding the company and the IPO Tech Tour events tackle the customers active in the growth stage. The community will offer a set of services that, next to the event, will provide necessary tools.